Beyond COVID-19: New opportunities for fintech companies - Deloitte
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Beyond COVID-19:
New opportunities for fintech companies
Many fintechs, As the COVID-19 pandemic continues to create uncertainty, many fintech companies
(fintechs) are under stress on a number of fronts. Access to funding was already becoming
like the rest of difficult, especially for some early-stage ventures, as many investors focused on established
fintechs with clear business models. In addition, recent interest rate cuts and the economic
the financial slowdown have radically changed many industry assumptions.
system, have Yet as the broader economy shifts from respond to recover,1 COVID-19 may create new
gone into opportunities for some fintechs. For example, as social distancing has taken hold worldwide,
there has been tremendous growth in the use of digital financial services2 and e-commerce.3
overdrive to While we can’t predict what form post-crisis opportunities will take, we do believe that
fintech—a sector that is steeped in innovation—is likely to generate new and
respond to transformative solutions.
the crisis. How fintechs are meeting the COVID-19 challenge
The most immediate concern, of course, is managing through the current uncertainty.
Many fintechs, like the rest of the financial system, have gone into overdrive to respond to
the crisis. Many, including insurtech and proptech companies, are shoring up their capital
and funding from investors and lenders.4 Others have implemented cost-saving measures,
including workforce reduction.5 Because revenues for many of them are transaction and
volume based, a priority strategy right now is making sure that as many expenses as possible
are variable and fixed expenses are minimized.Beyond COVID-19: New opportunities for fintech companies
Maintaining operational resilience is clearly top of mind as well. How are fintechs innovating to provide relief and
Lending fintechs are being inundated with customer requests for
enable recovery?
forbearance and relief, as well as for help in securing the small
business loans established by the Payroll Protection Program (PPP)
Fintechs tend to have some unique advantages that are allowing many
of the Coronavirus Aid, Relief, and Economics Security Act (CARES
to both create new ways of providing value in the current environment
Act). Similarly, payment- and wealth-focused fintechs are bolstering
and position themselves to thrive in the longer term. Fintechs have a
their infrastructure by expanding capacity or investing in new
number of attributes that give them the agility needed to rapidly create
resources to withstand the stress to their systems from higher
and deliver new solutions. Generally speaking, they are:
transaction volumes. These actions could be especially challenging
for fintechs that depend on transaction volumes for revenue and are •• Adept at harnessing and analyzing various types of data—for
thus cash-starved at the moment. example, credit and life insurance underwriting data;
•• Unburdened by complex, disparate, legacy systems, which allows
For insurtechs, winning the attention of investors is expected to
them to build platforms using a cloud-native approach that takes
get even more difficult, given the number of startups already in
advantage of the application program interface (API) ecosystem;
the market. And attracting end-users likely won’t be any easier
as insurers shift their focus to immediate needs and expense •• Laser-focused on a seamless and delightful digital
management in the wake of the COVID-19 outbreak. customer experience;
•• Familiar and comfortable with partnering within the broader financial
Current market conditions and social distancing practices have also
services industry and beyond; and
affected proptechs’ business growth, and many of those investing
in real estate are being forced to pause their activities until it is •• Accustomed to collaboration: Many use collaboration tools and have
clear that they will be able to sell the properties. Other proptechs, designed their work flow and operations accordingly.7
to retain their customers, are offering discounts and attractive
retention offers. So how are most fintechs harnessing their strengths to meet the
current challenge? First, they are doing their part to provide relief to
Beyond these more general finance and operating considerations, individuals and businesses coping with the effects of COVID-19.
each category of fintechs is responding to some unique challenges. For example:
Many online lenders, for instance, are tightening their underwriting
•• PayPal has waived fees on chargebacks and instant funds transfers
standards to retain the quality of their balance sheets and mitigate
from PayPal business accounts to bank accounts.8
any potential rise in defaults.6 They may also soon find that the
historical data they use to make underwriting decisions could be •• Lending Club has added new hardship plans, including waiving late
less reliable in today’s environment, and they will have to adjust their fees and allowing eligible borrowers to make interest-only payments
models accordingly. or skip up to two monthly payments.9
•• Square is waiving software subscription fees for Square
Payroll customers.10
•• Stripe is fast-tracking support for telemedicine platforms.11
•• Flock, a drone insurance provider, is allowing its commercial
customers to pause their policies when no work is being conducted.12
•• Kabbage worked with other fintechs like Lendio, Finix, and Fundera
to launch a platform that allows consumers to buy gift certificates to
support local small businesses during the coronavirus crisis. The gift
certificates can be redeemed at any time, but small businesses receive
the revenue within one business day of purchase.13
•• Nomo, a platform that assists freelancers in managing their
accounting, taxes, and invoices, is providing free temporary access to
its new customers.14
•• 7 Chord, the company behind the BondDroid AI engine that generates
prices for corporate bonds, is temporarily offering its services free
of charge.15
•• Revolut, which launched recently in the United States, and a number
of other fintechs have introduced a charitable-giving feature within
their apps so that their customers can donate funds to those affected
by COVID-19.16
2Beyond COVID-19: New opportunities for fintech companies
Next, many fintechs are innovating to create new products that Keeping an eye on future opportunities
address the rapidly evolving economic environment:
•• In the UK, Trade Ledger, Wiserfunding, Nimbla, and NorthRow Fintech companies may be forced to reexamine their mission and
have formed a business-lending taskforce to provide a turnkey business models after COVID-19. A key question is how to leverage
origination and underwriting platform that allows banks, both existing and newly developed assets to seize new opportunities
alternative lenders, and private debt lenders to virtually in the future. It could be an opportune time to think big and act boldly.
and digitally deploy funds to businesses during the
COVID-19 outbreak.17 First and foremost, it is apparent that social distancing is accelerating
customers’ use of online—especially mobile—channels to view and
•• Israeli fintech company Innovesta launched its COVID-19 Resilience manage their finances. Because many fintechs are purpose-built
Innodex (CRI). Using a proprietary artificial intelligence technology, for the mobile channel, they often excel in offering presentation,
the CRI assigns risk scores based on a business’ ability to withstand onboarding, underwriting, data visualization, and providing the
the effects of a pandemic such as COVID-19.18 right context for transactions. These capabilities will likely become
•• iwoca, an online lender, announced OpenLending, a platform that even more relevant and important as a greater number of financial
allows fintechs and banks to extend iwoca’s lending capabilities to transactions are conducted through digital channels.
more than two million UK businesses.19
Expanding partnership strategies
Finally, a number of US-based fintech companies—those that An important outcome of COVID-19 for fintechs may well be the
provide financial services as well as those that enable financial continued acceleration of partnerships with financial institutions, which
services—are helping to facilitate the financial relief provided under can offer the benefits of capital, distribution access, and compliance
the CARES Act: infrastructure, but often lack highly sought-after digital solutions. For
example, Blend, an established digital mortgage software provider, is
•• nCino has a developed a new solution to optimize the PPP seeing a strong increase in the number of interested banks that do not
loan process.20 yet have digital mortgage-lending solutions.26
•• ODX, a subsidiary of OnDeck, also has a solution that is specially
configured to the CARES Act.21 Fintechs may also continue to look for partnership opportunities
with other fintechs, bigtechs, and nonfinancial services firms. This
•• Lendio is enabling small businesses to apply for loans.22 partnership trend, including white-labeled fintech solutions, is
•• Unqork developed a small business digital lending platform.23 expected to accelerate. Growth in open banking and banking-as-a-
service regulations and initiatives could play an important role here.
•• Numerated, another digital lending platform, is seeing an increase
in banks’ interest in using its technology to handle the rise in For example, there is huge potential in holistic financial services
loan demand.24 that integrate consumers’ financial needs and behaviors, such as
healthcare. Integrating payments and other financial products into
Even prior to the CARES Act, companies like Biz2Credit set up health services is often considered needed in the United States
dedicated websites offering information about the Small Business and elsewhere. Partnering with nonfinancial services firms, such as
Administration (SBA) Economic Injury Disaster Loans (EIDL) and retailers in the “tailfin” space, could have potential. Examples of these
other types of funding for businesses in need of working capital innovative partnerships already exist, like the ones Walmart has with
during the coronavirus pandemic.25 A number of other fintechs PayPal and Green Dot.27 There are myriad opportunities for fintechs
have announced plans to offer PPP-related services. We expect that to collaborate with partners in other areas—for example with the big
numerous companies are working around the clock to tailor and technology firms—especially on a global scale.
deploy these CARES Act-specific solutions.
Advancing financial inclusion programs
The economic disruption of the pandemic is highlighting the
importance of serving people who are currently outside the financial
system, both in developing and developed economies. For instance,
at present there are 1.7 billion unbanked individuals worldwide,
according to the World Bank.28 The Federal Deposit Insurance
Corporation estimates that in 2018, 6.5 percent of US households were
unbanked and 16 percent were underbanked. Even for those who are
in the banking system, 40 percent would have difficulty covering an
3Beyond COVID-19: New opportunities for fintech companies
unexpected expense of even $400,29 and almost three-quarters of Empowering gig workers
employees in the United States “would experience financial difficulty Gig economy workers, numbering more than 50 million in the United
if their paychecks were delayed for a week,”30 according to results States alone, are another attractive segment for fintechs.33 Given
from the 2019 Getting Paid In America survey conducted by the their inconsistent or unpredictable income patterns, gig workers
American Payroll Association. typically have unique financial, insurance, and tax requirements.34
For this reason, they are generally underserved by banks, making
It is possible that COVID-19 may lead to greater financial inclusion them a growing opportunity for fintech firms.
as a result of recent government programs around the world to
help low-income households. Fintechs can play an important role, While it is unclear how COVID-19 might impact the growth of the
perhaps through strategic partnerships across a broad ecosystem gig economy, fintechs may end up targeting these individuals more
of players—including financial institutions, retailers, and the directly. There are already a number of fintechs and challenger banks
government sector—in distributing benefits to more vulnerable that serve the gig economy, including Green Dot, Salaryo, Joust, Qwil,
populations. Indeed, many fintechs made it their mission to Steady, and Cogni.35 Some provide features such as advances against
democratize financial services by providing basic financial services in unpaid invoices36 and the ability to find gig jobs on the app itself.37
a fair and transparent way.
Likewise, a few fintechs in the United Kingdom—Credit Kudos,
Accelerating economic relief efforts Fronted, 11:FS, Coconut, Capital on Tap, Mazuma, SeedLegals,
Numerous payments companies may be well positioned to aid in and TrueLayer—have formed a consortium and created a new
the more rapid disbursement of government relief funds, especially concept called Covid Credit to cater to freelancers affected by the
to those without bank accounts. Square, Venmo, PayPal, Finix, Plaid, COVID-19 crisis.38
Marqeta, and others—in addition to payroll-processing companies
like Gusto—may play a big role in the coming weeks and months.31, 32 Harnessing the Internet of Things
Another area is Internet of Things (IoT)–enabled contactless
payments, such as connected cars that allow consumers to pay
for gas or food without handling cash or other potentially infected
surfaces.39 In fact, it is possible that COVID-19 will accelerate the
adoption of IoT-enabled payments.
4Beyond COVID-19: New opportunities for fintech companies
The light at the end of the tunnel
The current uncertainty has placed businesses everywhere under
economic duress, and fintechs are no exception. But many in the
sector are already rising to the challenge, adjusting their products
and services to meet the needs of customers who are struggling
through the pandemic themselves. What’s more, given their
differentiated capabilities—namely adaptability and innovation—
many fintechs are well positioned not only to survive the crisis, but
also to contribute to the industry and society in meaningful ways
once the crisis is behind us. If history provides any lessons for this
unprecedented crisis, it may be that adversity inspires creativity.
5Beyond COVID-19: New opportunities for fintech companies
Endnotes
1. Punit Renjen, “The heart of resilient leadership: Responding to COVID-19. A guide for senior executives,” Deloitte, March 16, 2020, https://
www2.deloitte.com/us/en/insights/economy/covid-19/heart-of-resilient-leadership-responding-to-covid-19.html, and Deloitte, “The
Heart of Resilient Leadership. Responding to COVID-19,” Deloitte, March 12, 2020, https://www2.deloitte.com/content/dam/Deloitte/
global/Documents/About-Deloitte/dttl_the_heart_of_resilient_leadership_COVID19_1.pdf, accessed on April 5, 2020.
2. Anna Hrushka, “Banks need to push digital offerings during COVID-19 pandemic, experts say,” Banking Dive, March 18, 2020, https://
www.bankingdive.com/news/banks-need-to-push-digital-offerings-during-covid-19-pandemic-experts-say/574395/, accessed
on April 6, 2020.
3. Mario Ciabarra, “COVID-19 Impact on Online Sales,” medium.com, March 11, 2020, https://medium.com/quantum-metric/covid-19-
impact-on-online-sales-6c56e5717653, accessed on April 6, 2020.
4. AnnaMaria Andriotis and Peter Rudegeair, “People Need Loans as Coronavirus Spreads. Lenders Are Making Them Tougher to Get,”
Wall Street Journal, March 28, 2020, https://www.wsj.com/articles/people-need-loans-as-coronavirus-spreads-lenders-are-making-them-
tougher-to-get-11585357440, accessed on April 5, 2020.
5. Madison Hogan, “Report: Atlanta fintech unicorn furloughs ‘significant number’ of employees,” Atlanta Business Chronicle, March 30, 2020,
https://www.bizjournals.com/atlanta/news/2020/03/30/report-atlanta-fintech-unicorn-furloughs.html, accessed on April 5, 2020.
6. AnnaMaria Andriotis and Peter Rudegeair, “People Need Loans as Coronavirus Spreads. Lenders Are Making Them Tougher to Get,”
Wall Street Journal.
7. Rachel McIntosh, “Coronavirus: New Challenges and Opportunities for Fintech,” Finance Magnates, March 25, 2020, https://www.
financemagnates.com/cryptocurrency/news/coronavirus-new-challenges-and-opportunities-for-fintech/, accessed on April 5, 2020.
8. PayPal, “The support you need in times of need,” https://www.paypal.com/us/webapps/mpp/covid-19-relief, accessed April 6, 2020.
9. Lending Club, 8-K SEC Filing, March 30, 2020, https://ir.lendingclub.com/Doc/Index?did=57825815, accessed on April 6, 2020.
10. Square, “Important COVID-19 Resources for Square Sellers,” https://squareup.com/help/us/en/article/6825-important-coronavirus-
covid-19-updates-and-resources-for-square-sellers, accessed on April 5, 2020.
11. Stripe, “COVID-19 resources for Stripe users,” https://stripe.com/covid-19, accessed on April 5, 2020.
12. Miriam McNabbon, “Flock Joins Fight: £10,000 of Drone Insurance for Companies Working in Coronavirus Crisis Response,” DRONELIFE,
March 20, 2020, https://dronelife.com/2020/03/20/flock-joins-fight-10000-of-drone-insurance-for-companies-working-in-coronavirus-
crisis-response/.
13. Riley de Leon, “How a gift certificate is helping small businesses crushed by the coronavirus,” CNBC, March 18, 2020, https://www.cnbc.
com/2020/03/18/a-new-way-to-support-a-small-businesses-crushed-by-coronavirus.html, accessed April 6, 2020.
14. Ron Shevlin, “A List Of Fintech Firms Providing Free Technology During The Coronavirus Crisis,” Forbes, March 23, 2020, https://
www.forbes.com/sites/ronshevlin/2020/03/23/a-list-of-fintech-firms-providing-free-technology-to-banks-during-the-coronavirus-
crisis/#6b347f941b5e, accessed on April 6, 2020.
15. Ibid.
16. JD Alois, “Revolut works with anti-poverty Charity Trussell Trust Food Bank,” Crowdfundinsider, March 26, 2020, https://www.
crowdfundinsider.com/2020/03/159349-revolut-works-with-anti-poverty-charity-trussell-trust-food-bank/, accessed on April 5, 2020.
17. Manisha Patel, “New coronavirus fintech taskforce offers their support to SMEs,” The Fintech Times, March 26, 2020, https://
thefintechtimes.com/new-coronavirus-fintech-taskforce-offers-their-support-to-smes/?utm_source=feedly&utm_medium=rss&utm_
campaign=new-coronavirus-fintech-taskforce-offers-their-support-to-smes, accessed April 6, 2020.
18. Dara Albright, “Fintech-Driven Scoring Uncovers How COVID-19 Impacts Your Investments,” Financial Advisor Magazine, March 30, 2020,
https://www.fa-mag.com/news/fintech-driven-scoring-uncovers-how-covid-19-impacts-your-investments-54912.html, accessed
April 5, 2020.
19. Manisha Patel, “iwoca announces OpenLending which aims to serve 2 million SMEs by 2023 in fintech first,” The Fintech Times,
March 18, 2020, https://thefintechtimes.com/iwoca-announces-openlending-which-aims-to-serve-2-million-smes-by-2023-in-fintech-
first/, accessed on April 4, 2020.
20. nCino, “nCino’s Small Business Administration (SBA) Solution,” https://www.ncino.com/sba/, accessed on April 6, 2020.
21. ODX, “CARES Act Lending Through ODX,” https://www.odxsolutions.com/cares-act/, accessed on April 5, 2020.
22. Lendio, “Lendio Launches Paycheck Protection Program Loan Application for Small Businesses,” news release, https://www.
globenewswire.com/news-release/2020/04/03/2011761/0/en/Lendio-Launches-Paycheck-Protection-Program-Loan-Application-for-
Small-Businesses.html, accessed on April 6, 2020.
23. Unqork, “Unqork Small Business Lending Platform,” https://www.unqork.com/sb-lending, accessed on April 6, 2020.
6Beyond COVID-19: New opportunities for fintech companies
Endnotes
24. Anna Hrushka, “Banks, fintechs prepare for flood of SBA loan applications,” Banking Dive, March 31, 2020, https://www.
bankingdive.com/news/banks-fintechs-sba-loan-applications/575204/.
25. Biz2Credit, “Biz2Credit Launches SBA Disaster Loan Resources for Small Businesses Struggling Due to the Coronavirus,” March
26, 2020, https://www.globenewswire.com/news-release/2020/03/26/2007297/0/en/Biz2Credit-Launches-SBA-Disaster-Loan-
Resources-for-Small-Businesses-Struggling-Due-to-the-Coronavirus.html, accessed on April 6, 2020.
26. Dara Tarkowski, “COVID-19: A Catalyst for Innovation?,” medium.com, March 27, 2020, https://medium.com/datadriveninvestor/
covid-19-a-catalyst-for-innovation-81f22224245e, accessed on April 5, 2020.
27. Jim Daly, “Green Dot Says It’s the Go-Between in the New Walmart-PayPal Cash Service,” Digital Transactions, November 7,
2018, www.digitaltransactions.net/green-dot-says-its-the-go-between-in-the-new-walmart-paypal-cash-service/, accessed on
April 6, 2020.
28. A. Demirguc-Kunt, L. Klapper, D. Singer, S. Ansar, J. Hess, “The Global Findex Database 2017. Measuring financial inclusion and
the fintech revolution,” World Bank Group, 2017.
29. Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2018”, 2018,
https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf.
30. American Payroll Association, “Survey Finds Majority of Americans Live Paycheck to Paycheck,“ PR Newswire, September 10,
2019, https://www.prnewswire.com/news-releases/survey-finds-majority-of-americans-live-paycheck-to-paycheck-300915266.
html?mod=article_inline, accessed on April 5, 2020.
31. Donie O’Sullivan, “Venmo and Cash App want to deliver government stimulus payments,” CNN Business, March 27, 2020,
https://edition.cnn.com/2020/03/27/tech/venmo-cash-app-stimulus/index.html, accessed on April 6, 2020.
32. Jeff Kauflin, “Fintechs Say They Can Speed Up The Stimulus, If The Government Just Lets Them,” Forbes, March 31, 2020,
https://www.forbes.com/sites/jeffkauflin/2020/03/31/fintechs-say-they-can-speed-up-the-stimulus-if-the-government-just-
lets-them/#14b802a95f76, accessed on April 6, 2020.
33. International Labour Organization, “Helping the gig economy work better for gig workers,” https://www.ilo.org/washington/
WCMS_642303/lang--en/index.htm, accessed on April 6, 2020.
34. Ron Shevlin, “Gig Economy Banking Is Booming (And Banks Are Missing The Boat),” Forbes, September 23, 2019, https://www.
forbes.com/sites/ronshevlin/2019/09/23/gig-economy-banking-is-booming/#61ced9d9a9af, accessed on April 6, 2020.
35. Ibid.
36. Sarah Grotta, “Fixing the Banking and Payment Needs of the Gig Economy,” Payments Journal, September 20, 2019, https://
www.paymentsjournal.com/fixing-the-banking-and-payment-needs-of-the-gig-economy/, accessed on April 5, 2020.
37. Mary Wisniewski, “How fintech is changing financial services for gig economy workers,” Bankrate, August 15, 2018, https://www.
bankrate.com/banking/fintech-changing-financial-services-gig-economy/, accessed on April 5, 2020.
38. Ruby Hinchliffe, “Fronted, 11:FS and Credit Kudos create ‘Covid Credit’ for self-employed,” Fintech Futures, March 24, 2020,
https://www.fintechfutures.com/2020/03/fronted-11fs-and-credit-kudos-create-covid-credit-for-self-employed/.
39. Visa, “Visa Ready and IoT Payments,” https://usa.visa.com/visa-everywhere/innovation/visa-ready-and-iot-payments.html,
accessed on April 6, 2020.
7Beyond COVID-19: New opportunities for fintech companies
Contact us:
Alaina Sparks Kirby Rattenbury
US Fintech leader | Clients and Market Growth US Fintech co-leader | Audit and Assurance
Deloitte Services LP Deloitte & Touche LLP
Zach Aron Ken Schulhof
US Payments & Fintech co-leader | Deloitte Consulting US Fintech leader | Tax
Deloitte Consulting LLP Deloitte Tax LLP
Gina Primeaux Deloitte Center for Financial Services:
US Fintech leader | Deloitte Risk & Financial Advisory Jim Eckenrode
Deloitte & Touche LLP Managing director | Deloitte Center for Financial Services
Deloitte Services LP
The Center for Financial Services would also like to thank Prashanth Ajjampur, Madeline Clark, Sandeep Gupta,
Samia Hazuria, Chris Moller, Peter Reynolds, Jan Schoeps, and Val Srinivas for their contributions to this article.
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